The first three months of the year could not have been better for the stock markets in America, Japan and Europe. Wall Street collects record after record every day with the S&P 500 index rising by 9,85% and the Nasdaq Composite by 9,53%, Japan, which has just ended the season of negative rates, records a rise of Nikkei of 22,19% (best stock market in the world in 2024) and in the Old Continent Business Square, with an increase of 13,15% since the beginning of the year, is the queen of Europe ahead of Frankfurt (+8,68%) and the Paris (+8,07%). Yet the rate cut, which fueled the hopes and the rush of the markets in the second part of 2023, is not yet there. There Fed , ECB they will cut them, but not before June and the cuts will be smaller than expected: in America they were expecting 6 for 2024 and instead there will be no more than 3 and for Europe the first rate cut, as Lagarde was keen to point out, will not book the next ones. So what fuels the euphoria of the stock markets which curiously - an event which has only occurred 6 times in 80 years - is accompanied by the excellent health of government bonds and even the boom ingold and safe haven assets? First of all the danger escaped: the nightmare of recession it's over, there growth is robust in America and Europe the slowdown was gentler than expected and theinflation, despite some backlash, is declining.
For the stock market, economic growth and the decline in inflation are more important than interest rates today
In the eyes of the financial markets, economic growth and the decline in inflation count today more than the reduction in rates which is taken for granted but is less relevant than a satisfactory macroeconomic framework and expectations which continue to fuel confidence despite two wars ongoing, the outcome of which is not yet in sight. In practice, as Il Sole 24 Ore acutely reported in recent days, the market paradigm: today the growth of the economy and the decline in inflation are worth more than anything.
The triad that has always been at the basis of the stock market rise is fully in play: corporate profits are growing, as the new industrial plans of the major Italian groups have also demonstrated, rates are falling and expectations are rosy. If to all this we add the disruptive novelty of theArtificial intelligence explaining the euphoria of the stock markets is child's play, even if on Wall Street the magnificent 7 are being reduced to 4 due to the slowdown of Apple, Google and above all Tesla. But to all this must be added the abundant liquidity that the central banks of China and Japan have poured onto the market.
How long can the rally continue on the stock market?
Can the rally last? Here we would need a crystal ball to answer and the most accredited strategists warn that a correction, which can reach 10% of current stock market values without however being devastating, could happen, but obviously no one can answer the most important of questions: When will the correction come, if it will come? And will it really be soft? Considering that two months of rich dividends await us in Italy, the probability that the correction will occur later is higher.
Will Sell in May and Go Away also apply this year? In short, take the loot and run at the end of spring? It cannot be ruled out but there is no certainty in the stock market tomorrow and, contrary to the fears that circulated in the second half of last year, 2024 seems destined to still be a happy year for the stock markets and this certainly does not push for leak. However, the Black Swans that have caught us off guard in recent years (from the pandemic to the war) not to mention since the beginning of the century (from the attack on the Twin Towers to the collapse of Lehman) teach us that danger is always around the corner . Lowering our guard would therefore be risky but spring couldn't have started better than this.
